Institutional Shareholder Services, a proxy advisory group, had previously recommended that Chiquita shareholders vote down the merger and negotiate with Cutrale-Safra, after the Brazilian orange juice producer and investment firm unveiled a more than $660 million offer to buy Chiquita in August.

Chiquita’s planned merger with Fyffes, meanwhile, was announced in March as a tax inversion deal that would allow Chiquita to reincorporate in Ireland. The merger would create the world’s largest banana seller.

Chiquita has said that the Fyffes deal provides shareholders with the potential to realize significantly greater value.
Amy Sancetta/Associated Press

Last week, Cutrale-Safra raised its bid for Chiquita by about 8% after Fyffes sweetened its end of the merger to give Chiquita a larger part of the combined company. But Chiquita’s board rejected the increased offer, saying the new bid isn’t adequate and isn’t in the best interest of shareholders.

In its report Monday, ISS agreed, saying it had reassessed its initial recommendation and found Cutrale-Safra’s boosted bid is insufficient to warrant giving up the benefits of the sweetened Fyffes merger, which would give Chiquita shareholders a nearly 9% greater stake in the combined company.

ISS said the combined company, to be called ChiquitaFyffes, could post operating income in 2016 more than double what analysts polled by Thomson Reuters are expecting Chiquita to report in its year ending in December. At that rate, ISS values ChiquitaFyffes at $14.90 a share, above Cutrale-Safra’s latest offer for $14 a share.

“While the Cutrale-Safra cash bid appears to offer relative certainty of value, it does not appear to offer a sufficient premium to the value of the ChiquitaFyffes combination,” ISS wrote.

Many big institutional investors rely on ISS to help formulate their votes on mergers and other corporate actions. Its recommendations can sway the outcome of such votes.

For its part, Cutrale-Safra said last week that the Charlotte, N.C.-based banana producer Chiquita has overstated the attractiveness of the Fyffes merger and called into question some of Chiquita’s financial projections. Chiquita has said that the Fyffes deal provides shareholders with the potential to realize significantly greater value.

Chiquita shareholders are set to vote on the deal at a special meeting Friday.